Rural Indebtedness and Usurious Interest Rates in Eastern India: Some Micro Evidence

Mamata Swain ()

Journal of Social and Economic Development, 2001, vol. 3, issue 1, 121-143

Abstract: On the basis of data collected from three villages in Orissa, Eastern India, this paper reveals that the rural poor have limited access to institutional sources of finance. When in need they borrow from their lessors or employers at exorbitant rates of interest charged either explicitly or implicitly. The borrower repays the loan usually in the form of labour in the lenders’ fields or through crop produce. The amount of borrowing increases as income increases. The debt burden decreases as income increases. Major loans are meant for cultivation rather than for consumption. Credit contracts, interlinked with land, labour and output transactions, are observed more in irrigated villages than in non-irrigated villages. However, interlinkage is not found to be the dominant set of relationships in the study villages. Regional disparity in development seems to perpetuate interlinkage.

Date: 2001
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